The Dawn of A.I. in Accounting

We’re entering a new era. An era where the success and value of an accountant or bookkeeper will be based on how well they’re able to work with artificial intelligence.

You see the shift of accounting software to a full cloud environment and the rising AI revolution happening within the same decade has made it inevitable to that the two would meet. Artificial intelligence (and particularly the subfield of machine learning) is already a part of so much of our lives currently and finally it’s starting to hit accounting in a big way.

It’s incredibly exciting stuff. Yet perhaps the most amazing part of it all is that it’s just the start of a whole new era.

So as we enter a new dawn of AI mixed into the the world of accounting the burning question running through my head is, “How is this going to change accounting and bookkeeping?”

Firstly though I want to be super clear - I don’t think anybody can truly see where the revolution is going to lead. If you’d asked Johannes Gutenberg in 1439 how his new printing press was going to transform the printing industry the answer would unlikely have mentioned newspapers, magazines, the rise of News Corp and the mass publication of Harry Potter.

This isn't a game played out in weeks.

Yet my gut feeling is that there are clear signs in the technology that make certain results inevitable.

Technology eats inefficiencies for breakfast

Let me tell you - when I started work as a chartered accountant there were a lot of inefficiencies for both the client and the accountant. You’d need to wait for bank statements to be sent by post to the client, the client or a bookkeeper would have to type them into an accounting system, then physically take that data to the accountant who would have to rekey into another system for producing financial statements and then rekey the data again to the tax return.

In just a few short years technology and the cloud have eliminated every inefficiency in that process described. Amazing.

It turns out that what technology is really good at is taking inefficient human tasks and making them more efficient. It makes us better at doing the tasks important to our jobs.

You see a calculator is much better at arithmetic than a human. So we don’t calculate things ourselves to do our job - we use the technology.

A GPS is much better at reading maps and calculating arrival times. So we don’t read maps when visiting people - we use the technology.

It won’t be too long before a computer will be able to drive a car better than humans and respond better to hazards. So soon we won’t drive cars - we’ll use the technology.

So when we look at accounting and bookkeeping we can see already that where it has been really inefficient in terms of moving data between systems and repeating the same processes that technology has already stepped in to mimic our actions and create efficiencies.

As technology progresses this will only increase and any task where the most important aspect of it is that it is done efficiently and quickly is a task that technology will immediately eat.

As Kevin Kelly, the founder of Wired magazine puts it:

“Any job that can be specified in terms of productivity will be a job that goes to robots. Productivity is for robots”

The key question to look at then is what is next on the menu because at this point we've only really had the entree.

How will AI enter accounting? It's all about data

There are many large parts of accounting that are still inefficient and open to soon being done much better through AI.

Finding patterns in data, extracting information from reports and reconciling differences in balances are all inefficient tasks that need to be performed as quickly as possible - so they’ll go to the robots.

In fact I believe any tasks that rely on a rudimentary set of rules or systems will easily be done by AI and done better than ever before.

So technology will be used for such things as predicting cash flow based on payment and sales histories in real-time. Particularly if all it is doing is learning and adjusting a set of formulas or algorithms that the drive the end output

Technology will also analyse big data trends in the broader economy to predict and even suggest what actions would be beneficial to the business at the local level.

It will provide location data on customers in a store and predict where displays need to be located.

There’s even technology emerging already that analyses social media to let restaurants know what popular menu items are at restaurants like theirs.

It's things accountants and bookkeepers can technically already do. But the time taken to do it makes it inefficient to do so. Technology changes that.

The crux of AI goes one step further in using the data though in that as time goes on the technology will educate itself and improve independently.

It's a major leap.

I remember once hearing the comment that “if you’re doing the same thing more than three times there’s probably a way to automate it”.

As an accountant there were many things I did which which relied on a standard set of rules, research and parameters for extracting data.

So where I see the technology is really going to shine going forward is in the collection and management of increasingly larger and wider sets of data. And who better to manage the incoming data than the accountants and bookkeepers who spend their lives deep in the numbers?

The revolution will start creating and ticking the boxes on the data you need before you even know the box exists.

So with AI there will be another mantra - “if you’re trying to find the same information more than three times there’ll probably be AI that can learn to do it better and find more”

Accountants and bookkeepers get to create amazing experiences

Despite AI eliminating most inefficiencies in managing data I see many things which humans do which are incredibly inefficient that AI won’t largely disrupt.

Creating network relationships, giving guidance, teaching and creating innovation are all incredibly inefficient things to do. Yet in these tasks the efficiency and time taken to complete them is not the most important part of the task.

In these tasks the most important thing is that they’re beautiful, done well, a great experience and achieve the right result.

Technology and AI won’t dominate these tasks as they’re not primarily about being efficient.

It turns out that the most important parts of accounting and bookkeeping are also not about simply getting the job done as fast as possible but more about achieving the right result:

• Choosing the right entity structure for a business isn’t primarily about doing it as quick as possible - it’s about making sure it’s best structure to facilitate the goals of the business.
• When a business owner realises their children don’t want to take over the business the succession planning session with their accountant isn’t something that primarily needs to be done efficiently. The prime focus is about doing what needs to be done to get the business in the right shape for it to take the next step in it’s journey.
• A bookkeeper training their client on the best systems and processes to facilitate business growth shouldn’t be focused on doing it quickly - but doing it to get the best process in place.
• Complexities and ambiguities of taxation law generally don’t have a prime focus on being resolved quickly. They need to be resolved with the right facts, the right arguments and with the right end result.

The bulk of the work that accountants and bookkeepers do and enjoy the most is about creating a great experience to achieve the best result for their client.

That’s not a task that gets replaced by AI. The AI just drives it to be done better to create a greater experience and better result for the client.

“Let efficiency go to the robots..and we’ll take all the things that are based around experiences and relationships” - Kevin Kelly

The rise of the centaur advisor

Here's how I really see the technology changing the game.

You may remember in 1997 IBM’s Deep Blue defeated chess master Garry Kasparov and become the first computer to defeat a chess world champion.

Many see it as the end of the story in the human vs AI debate and say the computers have won.

However out of that match rose a new form of chess called ‘Advanced Chess’ which marries humans and computers on one team. The human-computer pairing created what has been dubbed the ‘centaur’ chess player.

This centaur pairing produces a skillset that plays better chess than either a human or computer playing on their own. The computers push the humans toward perfection.

However all the computers can really do is provide recommendations. You see not all the chess playing computers are the same so they can often produce different advice.

The role of the human player therefore is to decide what is the best move given the stage of the match and in consideration of the opponents skills on the other side of the table. Importantly it is always the role of the human to execute the move.

The technology simply amplifies the performance of the human.

This is exactly how I see it playing out in accounting.

The AI will provide to the accountants and bookkeepers insightful recommendations, useful suggestions and bring up rich data based on histories and patterns learned from previous situations.

But business is a game involving many human players where human decisions need to be made. That’s where the advisors will play a huge part interpreting the recommendations, comparing differing outputs and helping to make the optimal decision based on the best result for the client.

A human client who has needs and goals that technology can never really fully understand.

So the most successful accountants and bookkeepers will be those who understand and work with AI and technology the best.

They’ll be an incredible new breed of business advisors who mix intelligent human decisions with terrific AI generated data sources.

The technology ‘centaurs’ of the business world.

In other words: Welcome to Advanced Accounting.

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